Should UK enter the EMU

European Monetary Union

Essay , 2005 , 22 Seiten , Note: 1,2

BWL - Wirtschaftspolitik

Since the beginning of the idea of the European Monetary Union (EMU), UK had a negative attitude towards a single monetary policy with a single currency. This antipathy was amplified on the one hand by the withdrawal of the European Exchange Rate Mechanism in 1992 caused by different economic policies, oil price rises and German unification and on the other hand by the
launch of the EMU in 1999. In fact the UK government starts to work towards cooperation with the EMU by setting specific goals. But before taking further steps, the criteria of the Maastricht Treaty have to be fulfilled and the five economic tests assessed by the UK government have to be passed. Since 1997 the UK has made real progress towards meeting the five economic tests.
Although there are arguments that in a long term the payback of joining EMU offset the costs, the benefits are too low and the costs too high at the moment. The idea of one currency in Europe has been around for many years. But according to Pitchford the true launching of the EMU process dates from the Werner Committee which was set up in 1970 and submitted its final report, called 'the Werner Report', in February 1971. The first major step for the implementation of the Werner plan was the European 'currency snake' in
1972. Through this arrangement the fluctuations between participants' exchange rates should be limited to ± 2.25%. However, this process was not effective because of the collapse of the Bretton-Woods regime which determined a fixed exchange rate in terms of gold. The UK joined the snake system just for one month.
A further step was the creation of the European Monetary System (EMS) in 1979. The main objective of this system was to create monetary stability in Europe. This should be realized by the fixed rates between the currencies of the participating countries which where settled on their value against the European Currency Unit (ECU4). The UK did not join in the EMS and was still remote at the time of Delors Report in 1989.

Inhaltsverzeichnis

• INTRODUCTION
• THE DEVELOPMENT OF THE EMU
  • THE WERNER REPORT
  • THE EUROPEAN 'CURRENCY SNAKE'
  • THE EUROPEAN MONETARY SYSTEM (EMS)
  • THE DELORS REPORT
  • THE MAASTRICHT TREATY
  • THE EMS CRISIS
• THE BRITISH PUBLIC OPINION
• THE FIVE ECONOMIC TESTS
• THEORY OF OCA
  • THEORIES ABOUT THE BENEFITS JOINING AN OCA
  • THE COST-BENEFIT FRAMEWORK OF OCA
• BUSINESS CYCLE
• CONCLUSION
• APPENDIX A
  • SUMMARY OF THE THREE-STAGE APPROACH
• APPENDIX B
  • CONVERGENCE CRITERIA
• APPENDIX C
  • COMPARISON OF THE BRETTON-WOODS-SYSTEMS AND THE EMS
• APPENDIX D
  • SUMMARY OF THE RESULTS OF THE FIVE ECONOMIC TESTS
• BIBLIOGRAPHY

Zielsetzung und Themenschwerpunkte

This paper examines the question of whether the UK should join the European Monetary Union (EMU). It analyzes the historical development of the EMU, the British public opinion on the issue, and the five economic tests set by the UK government. The paper also explores the theory of Optimal Currency Areas (OCA) and its implications for the UK's decision.

• The historical development of the EMU
• The British public opinion on joining the EMU
• The five economic tests for joining the EMU
• The theory of Optimal Currency Areas (OCA)
• The potential benefits and costs of joining the EMU for the UK

Zusammenfassung der Kapitel

The paper begins by outlining the historical development of the EMU, starting with the Werner Report in 1971 and tracing the evolution of the European 'currency snake', the European Monetary System (EMS), and the Maastricht Treaty. It then discusses the British public opinion on joining the EMU, highlighting the UK's skepticism and the reasons behind it. The paper then delves into the five economic tests set by the UK government for joining the EMU, examining each test in detail.

The paper then explores the theory of Optimal Currency Areas (OCA), examining the potential benefits and costs of joining an OCA. It analyzes the theories about the benefits of joining an OCA, including the potential for increased trade, reduced transaction costs, and greater price stability. It also examines the potential costs of joining an OCA, such as the loss of monetary policy independence and the potential for asymmetric shocks.

The paper concludes by discussing the business cycle synchronization between the UK and the Eurozone, highlighting the challenges of joining the EMU without a synchronized business cycle. It also examines the potential impact of joining the EMU on the UK's economy, considering both the potential benefits and costs.

Schlüsselwörter

The keywords and focus themes of the text include the European Monetary Union (EMU), the UK's decision to join the EMU, the five economic tests, the theory of Optimal Currency Areas (OCA), the benefits and costs of joining the EMU, and the business cycle synchronization between the UK and the Eurozone. The paper examines the historical development of the EMU, the British public opinion on the issue, and the economic implications of joining the EMU for the UK.

• Veranstaltung: International Economics
• Note: 1,2
• Autor: Hartwin Maas (Autor:in)
• Erscheinungsjahr: 2005
• Seiten: 22
• Katalognummer: V113539
• ISBN (eBook): 9783640144280
• ISBN (Buch): 9783640148899
• Sprache: Englisch
• Schlagworte: Should, International, Economics